Correlation Between Principal Lifetime and Inflation Protection
Can any of the company-specific risk be diversified away by investing in both Principal Lifetime and Inflation Protection at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Principal Lifetime and Inflation Protection into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Principal Lifetime Hybrid and Inflation Protection Fund, you can compare the effects of market volatilities on Principal Lifetime and Inflation Protection and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Principal Lifetime with a short position of Inflation Protection. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Lifetime and Inflation Protection.
Diversification Opportunities for Principal Lifetime and Inflation Protection
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Principal and Inflation is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Principal Lifetime Hybrid and Inflation Protection Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protection and Principal Lifetime is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Principal Lifetime Hybrid are associated (or correlated) with Inflation Protection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Protection has no effect on the direction of Principal Lifetime i.e., Principal Lifetime and Inflation Protection go up and down completely randomly.
Pair Corralation between Principal Lifetime and Inflation Protection
Assuming the 90 days horizon Principal Lifetime is expected to generate 1.27 times less return on investment than Inflation Protection. In addition to that, Principal Lifetime is 2.73 times more volatile than Inflation Protection Fund. It trades about 0.09 of its total potential returns per unit of risk. Inflation Protection Fund is currently generating about 0.3 per unit of volatility. If you would invest 712.00 in Inflation Protection Fund on November 30, 2024 and sell it today you would earn a total of 23.00 from holding Inflation Protection Fund or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Principal Lifetime Hybrid vs. Inflation Protection Fund
Performance |
| Timeline |
| Principal Lifetime Hybrid |
| Inflation Protection |
Principal Lifetime and Inflation Protection Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Principal Lifetime and Inflation Protection
The main advantage of trading using opposite Principal Lifetime and Inflation Protection positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Lifetime position performs unexpectedly, Inflation Protection can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Inflation Protection will offset losses from the drop in Inflation Protection's long position.| Principal Lifetime vs. Mesirow Financial High | Principal Lifetime vs. Barings High Yield | Principal Lifetime vs. Gmo High Yield | Principal Lifetime vs. Ab High Income |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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